Which of the following transactions should NOT be disclosed in the income statement?Group of answer choicesPurchase of an office buildingSales discount offered to a customerDepreciation of vehiclesMaintenance of machinery
Question
Which of the following transactions should NOT be disclosed in the income statement?Group of answer choicesPurchase of an office buildingSales discount offered to a customerDepreciation of vehiclesMaintenance of machinery
Solution
The transaction that should NOT be disclosed in the income statement is the "Purchase of an office building". This is because the purchase of an office building is considered a capital expenditure, not an operating expense. Capital expenditures are recorded as assets on the balance sheet, not expenses on the income statement. The cost of the building will be depreciated over its useful life and that depreciation expense will be recorded on the income statement over time. The other transactions - sales discount offered to a customer, depreciation of vehicles, and maintenance of machinery - are all operating expenses and should be disclosed in the income statement.
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